Demurrage time bar: The importance of providing supporting documents in demurrage claims

Summary
Charterers successfully appealed an arbitration award under section 69 Arbitration Act 1996 on the basis that Owners did not submit all supporting documents for a demurrage claim within the 90-day time bar under the charterparty. Mr Justice Robin Knowles ruled that as the calculation of demurrage was pro-rated under the charterparty where another parcel was loaded/discharged at the same time and the bills of lading detailing the quantity of such parcel were available and referred to in the charterparty, they were part of all supporting documents to be presented by Owners with the demurrage claim, the failure of which led to the entire demurrage claim being time-barred. However, this case is to be viewed with caution by charterers seeking to rely on it as it expressly states that it was decided only on the basis of an interpretation of the particular clauses in this case, and without suggesting that there is a requirement to provide bills of lading where these are not available in a particular case.

Facts
Charterers appealed the arbitration award on the basis that Owners had not attached all of the necessary documents to their demurrage claim and because the 90-day period to submit those documents had elapsed, Owners’ demurrage claim had become time-barred. Under the charterparty both the calculation of laytime and demurrage was to be pro-rated where simultaneous loading or discharge of cargo from different charterers took place. Owners did not provide copies of the two bills of lading for the two parcels of cargo (Charterers’ cargo and a third party’s cargo). In regards to the statement of fact Owners submitted in support of their demurrage claim, the figure recorded did not accurately record the bill of lading quantities for the Charterers’ parcel. The statement of facts for the third party’s cargo stated that the bill of lading quantity was 6,014.906 MT.

The question to be determined by the judge on appeal was “Where a charterparty requires demurrage to be calculated by reference to bill of lading quantities, and contains a demurrage time bar which requires provision of all supporting documents, will a claim for demurrage be time-barred if the vessel owner fails to provide copies of the bills of lading?”.

In the arbitration award the tribunal’s view on this was that the statement of facts which records the bill of lading figure is in reality all that charterers need to check that the apportionment of waiting and discharging time has been correctly calculated. The tribunal recorded that to the best of its recollection in disputes involving the discharge of different parcels of cargo, parties to those disputes have “only ever adduced in evidence statements of facts and never any bills of lading”. It also had “very real doubts whether an owner could properly forward a copy of a bill of lading to a third party in an unconnected transaction without the permission of the holder of that bill of lading”.

This approach was rejected by the judge on appeal. He accepted that the correct approach was as per the case of The Abqaiq [2012] 1 Lloyd’s Rep. 18, which states that the requirement was for “documents which objectively [the charterers] would or could have appreciated substantiated each and every part of the claim”, so that they “were thereby put in possession of the factual material which they required in order to satisfy themselves that the claim was well-founded”. He further mentioned that the charterparty in the present case makes reference to the bill of lading quantities for the calculation of pro-rated demurrage and finally that the time bar refers not only to supporting documentation but to “all supporting documentation”.

On the confidentiality point he concluded that the bills of lading could easily be redacted and emphasised that there was no evidence that the bills of lading were not available in the present case.

Owners’ counsel argued that failure to submit the third-party bill cannot affect the entirety of Owners’ claim but only the part of the claim attributable to delays in berthing. However, the judge disagreed, holding that on the particular wording of the demurrage time bar in the charterparty, no reference was made to “constituent part(s)” as in the case of The Adventure [2015] EWHC 318 (Comm) quoted by Owners’ counsel, and as such Owners’ failure to produce bills of lading in support of their demurrage claim barred their entire demurrage claim.

Comment
While this case might on a first review appear to be of significant concern owners on the one hand and on the other to present a basis for charterers to rely on the time bar for demurrage claims in the frequent cases where a charterparty makes reference to bill of lading quantities for laytime and demurrage calculations, it is very limited in scope to the specific facts of the case and interpretation of the specific clauses of this charterparty.

Owners should nevertheless ensure that they do present (if necessary, redacted) bills of lading to charterers where they make a demurrage claim and the charterparty makes reference to bill of lading quantities for the calculation of laytime and demurrage.